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Who gets the Credit? Determinants of the Probability of Default in the German Hospital Sector

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  • Augurzky, Boris
  • Engel, Dirk
  • Schwierz, Christoph

Abstract

Huge underinvestment increases the need for private borrowing in the German hospital sector, the access to which is partly determined by the probability of default (PD) of individual hospitals. Using ordinary least squares and quantile regression techniques this paper provides first empirical evidence of its kind to evaluate the PD in the hospital sector and its constituent determinants. Based on annual account and medical data from 17% of all German hospitals we find that the current average probability of default amounts to approximately 1.7%, which is slightly higher than the average probability for all German firms. Among other determinants, we find that public ownership significantly increases the risk of default, while private for-profit and private not-for-profit hospitals do not differ. Moreover, demographic change in the form of population growth is confirmed to be relevant for the PD.

Suggested Citation

  • Augurzky, Boris & Engel, Dirk & Schwierz, Christoph, 2006. "Who gets the Credit? Determinants of the Probability of Default in the German Hospital Sector," RWI Discussion Papers 54, RWI - Leibniz-Institut für Wirtschaftsforschung.
  • Handle: RePEc:zbw:rwidps:54
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    File URL: https://www.econstor.eu/bitstream/10419/18605/1/DP_06_054.pdf
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    References listed on IDEAS

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    1. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361.
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    5. Danzon, Patricia Munch, 1982. "Hospital `profits' : The effects of reimbursement policies," Journal of Health Economics, Elsevier, vol. 1(1), pages 29-52, May.
    6. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584.
    7. Yu-Chu Shen & Karen Eggleston & Joseph Lau & Christopher Schmid, 2005. "Hospital Ownership and Financial Performance: A Quantitative Research Review," NBER Working Papers 11662, National Bureau of Economic Research, Inc.
    8. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731.
    9. Gaynor, Martin & Vogt, William B, 2003. " Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 764-785, Winter.
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    12. repec:bla:stratm:v:25:y:2004:i:6:p:587-611 is not listed on IDEAS
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    Cited by:

    1. Helmut Herwartz & Christoph Strumann, 2012. "On the effect of prospective payment on local hospital competition in Germany," Health Care Management Science, Springer, vol. 15(1), pages 48-62, March.

    More about this item

    Keywords

    Hospital profitability; quantile regression; probability of default; ownership type theories;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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